Finance Minister Nirmala Sitharaman, on July 28th, 2023, dropped a game-changing announcement for listed and unlisted companies. So, what’s the news, you may ask? Indian companies can now strut their stuff directly on the GIFT IFSC Exchange! In simpler terms, Indian companies can now directly list on the International Financial Services Centre (IFSC) in Gujarat’s GIFT City.
The move comes in line with the industry’s demand which, up until now, were allowed to list overseas only through American Depository Receipt (ADR) and Global Depository Receipt (GDR) routes. Once the listing is done on the IFSC exchange, further listing on other foreign indices could follow.
Now what’s the big deal here? Well, it’s about giving GIFT City a turbo boost, transforming it into a happening global financial hub, all while Indian companies get a golden ticket to tap into global funds and score high valuations.
Back in May 2020, the government gave a thumbs up for Indian public companies to list directly abroad. But nothing really moved for almost three years – no law, no framework. Fast forward to March 2022, Reuters dropped the news that the plan got paused to give our local capital market a boost.
Now, finally, the announcement has come and is good news, especially for corporate giants looking for a hefty equity pool. Let’s read more about this news!
Benefits of direct listing on GIFT IFSC exchange
Now let’s talk big money – India’s stock market boasts a whopping $3.8 trillion market cap, all thanks to homegrown companies.
Now, GIFT IFSC in Gujarat is turning heads with reverse flipping, like PhonePe coming back home from Singapore. This trend could entice more companies, especially startups with foreign roots, to call India their base. But remember, tax implications come along for the ride. And guess what? Listing on GIFT IFSC is like strutting on a global stage, even for Indian companies listed abroad.
Now let’s get straight to how it can benefit us.
- Our Indian companies have gone global – they’re big, they’re mighty. Now, they can tap into deep-pocketed global markets for hefty funds. Think of it as getting a slice of the global capital pie.
- This gives a little flexibility to companies, and new move gives them room to stretch, to see their real value shine, and to gather some serious capital for future expansions.
- Opening the door to listing in GIFT City means rolling out the welcome mat for local and global investors.
- Going the GIFT City route lets local investors tap into some pretty sweet tax rules. It’s like giving them a special key to a treasure trove!
Should IFSC in GIFT City be recognised as a permissible jurisdiction?
Back on December 4, 2018, an expert committee backed by SEBI spilled the beans on something we’d all been eagerly anticipating. Their report is like a treasure map, revealing how everyone – from the big players to the stakeholders – can hit the jackpot with this direct listing move. But that’s not all. They also played detective and found a few drawbacks in the current system, along with some slick ways to smooth things out. And here’s the kicker – they even dished out a list of 10 foreign hotspots where our Indian companies could really spread their wings.
The report isn’t exactly flashing the green light for Indian companies to just dive headfirst onto the stock exchanges at the International Financial Services Centre (IFSC) in GIFT City, Gujarat. It’s like IFSC is playing the international game, but not with all its cards on the table. While it’s all cool for debt securities, when it comes to equity shares of Indian companies, IFSC is like, “Hold up, not so fast.” They’re basically laying out the rules to figure out which foreign stock exchanges would be the perfect fit for our Indian companies to shine on. They’ve given a thumbs up to criteria like being a member of the IOSCO and FATF squads. Plus, it’s like a secret handshake – the foreign securities market regulator needs to sign onto IOSCO’s memorandum.
And guess what? They’ve even got a list of ‘permissible jurisdictions’ that tick all these boxes. IFSC in GIFT City fits the bill since India is in the cool club with both IOSCO and FATF. But it’s not just about fitting into the mould; it’s about opening doors for Indian companies to rake in capital and find those golden valuations.
The committee’s top recommendation is to let those companies born and bred in India list directly on India INX or NSE IFSC. It’s like giving them a VIP pass to the global financial party, and we’re all here to witness the financial fireworks!
India companies can now directly list on the IFSC exchange in the GIFT City, opening gates for more growth and opportunities. As Indian companies make a jump, they want to study the tax implications, benefits and cons of the move.